State Roundup

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By the end of June 2013, all but a small handful of States will have adjourned sine die—meaning that there’s no scheduled future meeting date, or, more typically, that the legislature has adjourned officially for the 2013 legislative period. Only California, Massachusetts, Michigan, New Jersey, Ohio, Pennsylvania, and Wisconsin have final adjournment dates later than June 30, 2013, although state legislatures may yet be called back into special session should the occasion warrant it. In addition, roughly half of the States carry over legislation into the 2014 legislative session. What this means is that it’s a good time to review and wrap up some of the legislative activity affecting the annuity industry, understanding that some of the bills NAFA has been tracking weren’t yet enacted will “die” for lack of activity, or might still be acted upon, depending on whether the legislature is still in session or can carry over the legislation into 2014.

Alabama Senate Bill 29, Protecting Alabama’s Elders Act, was signed into law on May 23, 2013. Makes it a crime in Alabama of the financial exploitation of an elderly person, which is defined as a person 60 years of age or older, and provides penalties. There is a seven-year statute of limitations included in the Act; however, reasonable belief that the victim was not an elderly person is no defense to the crime. Effective August 1, 2013.

Arizona House Bill 2358 was signed by Governor Brewer on April 30, 2013, and was numbered 2013 Chapter 160. Ch. 160 establishes new continuing education requirements for the renewal of insurance licenses, increasing from 40 to 48 the number of completed credit hours (including at least six hours of ethics training) necessary for a resident licensee to renew his/her license, for licensing periods beginning on or after January 1, 2014. Agents who have been continuously licensed since January 1, 1995 would be grandfathered in and wouldn’t be subject to the new requirements.

Arkansas Senate Bill 1170 (2013 Act 1330), signed into law on April 18, 2013, provides that Arkansas becomes the forty-first State to join the Interstate Insurance Product Regulation Compact.

Florida Senate Bill 166 (2013 Chapter 163) was signed into law on June 14, 2013 by Governor Rick Scott. Chapter 163 adopts the 2010 NAIC Suitability in Annuity Transactions Model Regulation (#275), which extends Florida’s consumer protection laws relating to the sale of annuities. It expands the scope of current FL law to generally apply to all consumers purchasing an annuity–not just senior consumers, age 65 and older. Ch. 163 retains current law relating to limitations on surrender charges and deferred sales charges that may be imposed on senior consumers, limiting the surrender or deferred sales charge to no greater than 10% of the amount withdrawn and prohibiting any surrender or deferred sales charge after the end of the 10th policy period or 10 years after the premium is paid, whichever is later. It requires producers to document information related to the annuity sales transaction and to retain such records for a period of five years. Also, the unconditional refund period is expanded from 14 days to 21 days for all purchasers of an annuity (currently only senior consumers have a 21-day refund period). Furthermore, in transactions involving a replacement or an exchange, consumers of any age must be provided with information regarding the differences between the annuity being purchased or exchanged and the existing annuity that would be surrendered or replaced—again, this requirement currently only applies to sales to senior consumers. Chapter 163 would also require that certain disclosures be provided in 12-font, bold print on the cover page of the annuity contract. Ch. 163 doesn’t include the Model Regulation’s producer training requirement, but current Florida law requires that producers complete at least three hours of suitability training as part of their continuing education requirements. Chapter 163 takes effect October 1, 2013.

Hawaii House Bill 303 would create the offense of financial exploitation of an elder, defined as an individual aged 62 or older. HB 303 hasn’t been advanced out of Committee, and the Hawaii legislature has adjourned sine die as of May 2, 2013. However, Hawaii allows that legislation can be carried over to the 2014 legislative session, so NAFA will continue to monitor.

Indiana House Bill 1321 (2013 Public Law 276) amends the Indiana Insurance laws relating to the reserve valuation of life, annuity and endowment contracts.

Kansas Senate Bill 26 would require Kansas-licensed agents who hold a life contracts qualification to take at least one hour of their 12 biennial continuing education requirements in insurance ethics, which may also include regulatory compliance. KS SB 26 was stricken from the Calendar on April 2, 2013, and the Kansas Legislature adjourned sine die on June 2nd; however, Kansas allows for the carryover of legislation to the 2014 legislative session, so NAFA will continue to monitor.

Maryland House Bill 532 (2013 Chapter 377) was approved by the Governor on May 2, 2013. SB 532 relates to continuing education requirements for insurance producers. Effective October 1, 2013, the Commissioner of Insurance is prohibited from disapproving a CE course solely on the basis of the methodology or technology used to deliver the instruction to the individuals taking the course, and insurance producers will be allowed to obtain all or part of their CE credit hours required for license renewal online.

Massachusetts House Bill 870 would provide that active membership by an individual insurance producer in the National Association of Financial Advisors-Massachusetts may be approved for up to three hours per year of continuing education, provided that not more than nine hours of continuing insurance education may be awarded to an individual insurance producer for membership in the organization during a thirty-six month reporting period. Credit for continuing insurance education pursuant to this subdivision may only be awarded to individual insurance producers who are required to complete at least 45 hours of continuing education per 36 month reporting periods. MA HB 870 is still in Committee; however Massachusetts doesn’t adjourn its legislature until December 31, 2013. NAFA will continue to monitor.
Massachusetts House Bill 880 would require resident and nonresident producers who are licensed to sell life insurance and annuity contracts to complete three hours of continuing education on Ethics for each licensing renewal period as part of their continuing education requirements. It would also add, in addition to a license suspension, the potential of receiving a civil fine of not less than $20 or more than $100 for each hour of CE instruction that a producer fails to meet, if the producer hasn’t been granted an extension of time. This wouldn’t apply to nonresident producers who hold an equivalent license in their home state and have satisfied their home state’s CE requirements, where reciprocity is recognized. MA HB 880 is still in Committee, and NAFA will continue to monitor.
Massachusetts House Bill 536 would establish the Senior Citizens and Disabled Persons Abuse Prevention Fund and would provide funds to educate senior citizens, disabled persons and other citizens of Massachusetts about consumer protection laws and rights, and to underwrite seminars providing such education. It also authorizes MA courts to impose additional charges for unfair business practices taken against senior citizens or persons with disabilities. MA HB 536 is still in Committee, and NAFA will continue to monitor.

Minnesota House File 791 (2nd Engrossment) has been enacted and adopts, generally, the 2010 NAIC Suitability in Annuity Transactions Model Regulation (#275); however, like Florida and California’s approach to the adoption of the 2010 Model, the MN rule is more aggressively consumer oriented. The bill became effective on June 1, 2013, but the effective date for training requirements is January 1, 2014 for individuals who don’t hold a license as of January 1, 2014, or June 30, 2014 for producers who are licensed as of that date.

Montana Senate Bill 108 (2013 Chapter 317) was signed into law on April 26, 2013. Ch. 317 revises Montana laws related to the tax credit for contributions to a qualified endowment, which specifies the minimum annuity rate for deferred charitable gift annuities and clarifies the required timing of payments for deferred charitable gift annuities.

New York Senate Bill 3065 (Companion Bill, Assembly Bill 7494) would require that replacements of life insurance policies or annuity contracts with another policy or contract be consistent with the NAIC Life Insurance and Annuity Replacement Model Regulation. As of this writing, both SB 3065 and AB 7494 are in Committee; however, NY doesn’t adjourn its legislature until December 31, 2013, so NAFA will continue to monitor.

New York Assembly Bill 634 would require insurance producers to complete a minimum of three hours annually of continuing education on the subject of suitability in annuity and life insurance transactions; would prohibit the use of certain designations or titles in insurance and annuity sales transactions; and would create separate standards for the sale of annuity contracts to senior consumers (age 65 and up); and, in the instance of a replacement or exchange, it would require agents to provide a form describing the difference between the existing contract and the replacement. As drafted, the legislation would take effect January 1, 2015. NY AB 634 is still in Committee; however, NY doesn’t adjourn its legislature until December 31, 2013, so NAFA will continue to monitor.

New York Assembly Bill 1983 (Companion Bill SB 2895) would establish New York as a member of the Interstate Insurance Product Regulation Compact. It is still in Committee and NAFA will continue to monitor.

Oklahoma House Bill 1512 (the OK Insurance Omnibus Bill), approved by the Governor on May 14, 2013, includes a provision which would require all annuity contracts, under which an election may be made to have optional maturity dates, to have a maturity date not later than the anniversary of the contract next following the annuitant’s 70th birthday, or the 10th anniversary of the contract, whichever is later (i.e., the “70/10 Rule”). This rule is effective on contracts issued after November 1, 2013.

Utah House Bill 47 (2013 Session Law 319), signed into law on April 1, 2013 and effective as of May 14, 2013, expands on the duties of producers related to the replacement or exchange of life insurance and annuities, adding some notice and documentation requirements.

Washington Senate Bill 5510 (2013 Chapter 263) addresses abuse and exploitation—including financial exploitation of vulnerable or older adults and revises the definition of “neglect” to include an act or omission by a person or entity with a duty of care that demonstrates a serious disregard of consequences of such a magnitude as to constitute a clear and present danger to a vulnerable adult’s health, welfare (including financial welfare), or safety. It is effective July 28, 2013.

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